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In order to run a successful firm, the entrepreneur must understand the environment in which it must operate. In every element, the organization is deeply influenced by environmental factors such as the collection of individuals and entities. Certain environmental elements may or may not be under the business's control, but they do have an impact on its type, location, distribution system, product prices, and staff policies. Although the business environment varies by region or country, it can be defined as the sum of both internal and external aspects to the business. For instance, it touches on forces like competitors, customers, suppliers, government, and the political, technological, and legal conditions (Ebert, Griffin, Starke, and Dracopoulos, 2014). The paper discusses the internal business environment and external business environment while assessing how government intervention in a market economy is essential in improving the context in which businesses operate.
Internal business environment
The microenvironment encompasses of factors affecting the performance of the business from the immediate environment. One of such factors includes the value system of an organization that elaborates the ethical beliefs guiding in the achievement of its objectives. The value system influences the adoption of the business policies as well its practices. Additionally, an organization’s mission affects its decision and economic activities thus defining the entire purpose for business existence. An outstanding organizational structure composed of the board of directors, the share-holding pattern, and the extent of professional management leads to efficient outcomes for the company (Kuratko, Hornsby, and Covin, 2014). Similarly, the internal business environment is subjective to physical resources and technological capabilities. For instance, plant and equipment integrated with high-tech structures provide a competitive edge compared to other businesses due to its efficiency in unit cost production. Lastly, the labor unions ensure collective bargain of wages for the employees and working conditions are maintained for a smooth running of the business.
External business environment
The macro environment of an organization is made of factors outside the business which affect its ability to function. Some of the external forces are uncontrollable, but the company can respond to them through marketing whereas others require the organization to make some adjustments. Customers being part of the external environment can be influenced via the release of strategic release of corporate information thus attract them to purchase the products and services provided. Moreover, the company’s competitors affect the manner in which the target market is approached (Mugurel-Alin, 2017). For instance, the business may decide to discover markets the competitors are not involved in or take on the same market with them. The public perception of an organization can lead to a decline in sales when its negative as well increase the sales with positive company news. Through the release of favorable strategic information, the business impacts public opinion affirmatively thus defusing any potential issues.
Government intervention is deemed necessary in any market economy in the improvement of both internal and external business environments where businesses operate. It has its effect on nature of economic activity in the business market, gives an understanding of the financial situation of the company, and evaluates the broad approaches to an organization and management as well.
Nature of economic activity in the business market
The government regulates the kind of economic activity in the market for some reasons. First, consumer protection is designed to safeguard the rights of the customers, its fair trade, accurate information in the marketplace, and competition. For every economic activity to grow, the consumers need to trust the producers or businesses’ assurance of quality and safety of their products (Botha, Kourie, and Snyman, 2014). The consumer protection laws prevent companies engaging in particular unfair practices from taking advantage of their competitors. As part of the government laws, organizations are required to release detailed information about the products, especially where the safety and public health issues need to be checked.
Secondly, the government regulates the workplace safety through the Safety and Health Act of 1970. The Act ensures that employers offer safe and sanitary work environments by having a grading scale and frequent inspections. Businesses ought to meet specific standards to sustain their operations. Hence they have to provide hazard-free workplaces to avoid employees’ harm or even death. The government incorporates both private and public strategies depending on workplace hazards and the kind of workers (Carroll and Buchholtz, 2014). In the private approach, workers have two options of either searching for jobs in safe workplaces or joining labor unions hence have a bargaining power with their employers. On the other hand, the public approach gives the option of suing for individual rights in court against the hazardous nature of the work.
Lastly, the government’s aim to protect the environment affects the nature of the economic activities since proponents of tighter environmental regulations challenge specific businesses. For example, the manufacturing companies emitting gases that are pollutants to the environment face restrictive laws thus limiting their operations. In other cases organizations are given subsidies such as favorable tax treatment, procurement mandates, and low-interest loans for activities believed to be environmentally friendly (Cummings and Worley, 2014). Some of the environmental policies aimed at putting the environmental resources such as water, air, the atmosphere, land, and particular habitats under clear and enforceable rules with various forms of restrictions on access to these resources.
Understanding the economic environment of business
The government functionality in the business environment is experienced through its command over all resources in the economy. Some of the government’s roles discussed below have provided the platform for companies to excel while ensuring a balanced regional growth, infrastructural enhancement, and constitutional framework. First, the regulatory function of the government measures and controls the limits of the private sector (Miller and Barbour, 2014). Some of the objectives in the regulation of business functioning enable the government to reduce monopoly in the market, to encourage small and new enterprises, and offer a balanced regional growth. Besides that, there are discretionary and non-discretionary measures regarding the economic activities. Discretionary processes include the direct fixation of prices of commodities, the rationing of supplies of goods, quantitative restrictions on export and imports, and the distribution of scarce resources for the optimum utilization of resources. Consequently, non-discretionary measures are involved through fiscal and monetary policies such as the imposition of different taxes on different products, amendment of tariffs, and regulation of bank interests.
Secondly, the government has an entrepreneurial role whereby it participates in economic activities through the ownership of public sector projects such as the provision of transportation, communication, electricity, and power (Cummings and Worley, 2014). Involvement of the government in the provision of specific products and services results to it being a monopoly in those industries. The public sector only establishes sectors like the manufacturing of arms and ammunition, management and ownership of railways, the mining of minerals, and the production and control of atomic energy. Therefore, the government’s role in entrepreneurship is for social welfare, for capital-intensive growth as well as providing consultancy to the private sector.
Lastly, the government acts as a planner to have optimum utilization of resources. The primary objective of the mobilization of resources and formulation of plans is to develop the nation. There are two kinds of planning that help in the understanding of the economic environment of the business, centralized and decentralized planning. In centralized planning, the top management makes the decisions and passes them to state-level employees to implement (Carroll and Buchholtz, 2014). On the contrary, in decentralized planning, the plans are initiated from the bottom level workers to the regional and national level management. Therefore, the government being part of the planning role, it increases the level of productivity, achievement of high per capita income and Gross Domestic Product (GDP), generation of employment, and attainment of social justice.
Government approaches organization and management
The unitary approach
The approach identifies every work in an organization as an integrated whole existing for a common purpose. Every worker associates with the mission and objectives of the organization hence emphasizing on the co-dependency of the employers and employees (Miller and Barbour, 2014). There are no existing conflicts between the interests of those supplying capital to both the managerial representatives and the enterprise together with those contributing to the labor. However, the trade unions are not welcome since they are referred to as intrusions into the business form the outside competing with the management for the loyalty of its employees.
The systems approach
The approach holds an argument that the many component subsystems in an organization work harmoniously for the success of the more extensive systems. Some of the primary factors that are considered in the management-labor relationship include the environment, the rules, and the interactions (Egorova, Laptev, Krylov, Orlova, and Khabarov, 2015). Most of the businesses incorporate various subsystems such as procurement, production, quality control, sales, and the human resource departments. To stabilize the employment relationship, the interaction of the employees, the trade unions, management as well as the government calls for rules to optimize the outputs of the system.
The pluralist approach
The approach accepts that industrial relations conflicts are inherent within the society hence can be put up through different institutional arrangements. Furthermore, the existence of various ruling principles allows the diverse and divergent point of views from the management and trade unions which arises through negotiation, compromise, and concession (Schaltegger and Wagner, 2017). According to research, the worth and legitimacy of the collective bargaining act as conflict-resolving and rule-making procedures. Therefore, it is more mutual in companies with a considerable number of employees, for instance, retail store chain and hotel chain.
In conclusion, it is evident that government intervention improves the businesses’ environments by leading to a redistribution of income and wealth hence advancing the equality of opportunities. Sometimes the government intervenes on behalf of the firms to overcome the occurrence of prolonged recessions as well as reduction of unemployment. The nature of economic activity in the business market is regulated by the government through consumer protection, workplace safety, and safeguarding of the environment as a result of its regulatory role, entrepreneurial role, and planning function. To this end, the unitary approach, the systems approach, and the pluralist approach have proved essential in controlling the organizations and their management.
Botha, A., Kourie, D., and Snyman, R., 2014. Coping with continuous change in the business environment: Knowledge management and knowledge management technology. Elsevier.
Carroll, A. and Buchholtz, A., 2014. Business and Society: Ethics, sustainability, and stakeholder management. Nelson Education.
Cummings, T.G., and Worley, C.G., 2014. Organization development and change. Cengage Learning.
Ebert, R.J., Griffin, R.W., Starke, F.A. and Dracopoulos, G., 2014. Business Essentials. Pearson Education Canada.
Egorova, M., Laptev, G., Krylov, V., Orlova, E. and Khabarov, S., 2015. Legal Forms and Regulation and Coordination Coordination of Economic Activity (No. madd3).
Kuratko, D.F., Hornsby, J.S. and Covin, J.G., 2014. Diagnosing a firm's internal environment for corporate entrepreneurship. Business Horizons, 57(1), pp.37-47.
Miller, K. and Barbour, J., 2014. Organizational Communication: Approaches and processes. Nelson Education.
Mugurel-Alin, M., 2017. The management of external business environment interaction with the company. Development.
Schaltegger, S. and Wagner, M. eds., 2017. Managing the business case for sustainability: The integration of social, environmental and economic performance. Routledge.
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